Gail Greenberg’s goal is having abundant cash flow so she can have personal freedom. She actually has had tremendous freedom as a freelancer and being married to one, but she didn’t have predictable income. She got into real estate by accident when she had to sell the family house, and by 2016 started to get serious about notes. Gail is now the acquisitions manager of Win Win Notes doing multiple note deals. She recounts her first year as a note investor and her journey and lessons learned from zero to thirty deals.
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From Zero to Thirty Deals with Gail Greenberg
We are here on Note CAMP 5.0 with Gail Greenberg. Gail is a good friend, a part of our Mastermind group. She is one of the great investors with case studies of how she went from having no deals to having multiple deals and what her systems and her models have been over the year as she’s gotten to that point. When you’re in there looking for ways to build your business model and expectations of what you need to have coming in every month to reach your goals, these are the people that you want to sit down and listen to to see how they got to it. Her official title of her presentation is My First Year From 0 to 30 Deals. Gail, I will go ahead and turn that over to you.
I’m here to entertain and hopefully inform you a little bit with some stories about what goes on, what has happened to me in my first 30 deals. Hopefully, you’ll find it entertaining as well as inspiring and maybe learn a thing or two. Just by way of introduction, Gail Anthony Greenberg is what I use on most social media. I’m a Philly girl. It’s an exciting time to live in Philadelphia. We’ve had some success in sports. You might have heard about it. I’m not even a big sports fan, but I’m living in the city now where people literally just randomly high five each other on the street because they’re so excited like, “Can you believe we live in Philly?” Win Win Notes is my website. I want to say for everybody who has friends and family who are scratching their heads and saying like, “How in the world are you going to make money buying mortgages that nobody is paying?” That is literally a question that an investor that I had for other kinds of real estate asked to me. If you or anyone you love are asking the same thing, feel free to go and take a look.
I’m a graduate of the Journalism School at Boston University. Their more famous graduates are Bill O’Reilly and Howard Stern. I feel like no matter how famous I get, I will never bump them off the wall of fame. I had a fun time there. I ran a magazine while I was in college and we were the first to interview The Amityville Horror ghost hunters. My first jobs were at New Orleans Magazine and then I came home to the Philadelphia area and worked at a business magazine. Then I met my husband who works for an ad agency and was having so much more fun than me working and making three times as much. I very quickly abandoned my original plan to be a journalist. I went into PR and marketing. I then freelanced for most of my career. I wrote a book that was praised by the director, Sam Raimi, of the original Spider-Man movies. He even called me on the phone and I was so tongue tied. It was one of the low points of my life in terms of feeling like I handled something well. I have one husband, three kids and two dogs. I’m not sure how many you need to be a crazy dog lady, but I feel like I could get there very easily.
I’m a certified hypnotist. I mentioned that only because I was very risk-averse for most of my life and it made it very difficult to do a real estate because real estate is a very high risk, high stakes game. I saw a presentation about how women especially start to become very perfectionistic and risk-averse in adolescents because they get a lot of great attention for being great little students and great little everything’s and then they don’t want to stop getting praised. I cured myself through self-hypnosis. I want to want to put that out there for anyone who thinks that they’ll never get started. I love having fun and unusual adventures. I belong to a Mardi Gras crew in New Orleans and I rode my first parade. I’m throwing stuff to people. It was absolutely hilarious seeing people from that vantage point. It’s so entertaining what people will do for a handful of beads. My daughter and her friends are in front of my float. My float had what appears to be a decorated manhole cover on it. That’s the classic water meter cover in New Orleans. I have no idea why it was on the float. No one in New Orleans ever explained anything. That’s our version of family fun, although we get to help people.
One of the things that slowed me down when I was doing other kinds of real estate is that I always felt that some of it required taking advantage of people. When you’re wholesaling and you’re trying to get a property as cheap as possible, and you know that they can probably get more from someone else. I never felt good about that and I’m not judging anyone who does those jobs, but it’s important to know who you are and to be very true to who you are and as authentic as possible. For me, this has been a real coming home and a delight to be in notes. My goal is an abundant cashflow so I can have personal freedom, a house in New Orleans and I can be a philanthropist. I have had tremendous personal freedom as a freelancer, married to a freelancer. What I haven’t had is predictable income. There’s been a lot of years when we haven’t known where our next dollar is coming from and that’s gotten a little old. I know a lot of people set goals and particularly initially you feel like you should set realistic goals. I want everyone to remember, if you can get to $10,000, you can get to $50,000, you can get to a $100,000 a month. It’s just the same thing. Lather, rinse, repeat.
I got into real estate by accident when my dad died in 2011 and I had to sell my family’s house. His house is in a little town about an hour away from Philadelphia. It was the kind of town that was extremely vibrant in the ‘60s. It was a factory town. Things radically changed in the ‘70s and it became very depressed. Billy Joel’s song, Allentown was supposed to be about my town, Pottstown, but the rhythm didn’t work. I grew up next door to this house. We lived in a tiny little house when I was growing up right next door to this one. My parents own this lot next door. For some reason, I’m the youngest and my older brother was already away at college. For some reason, when I was entering high school, my parents decided let’s build this gigundo house. They built this house and it had a few problems. In fact, it had all the plagues of real estate. High taxes. The schools are absolutely terrible in this town. It was on a busy street, has a weird layout. There’s only one bedroom and a bathroom on the main floor, and then two more bedrooms and a bath in the basement and no egress. That appraisal time, they weren’t even sure that they could count the two bedrooms as bedrooms. We came very close to trying to sell a one bedroom house. Everything was original. My dad took care of everything or more specifically didn’t use anything so it would remain forever. Mold, radon, termites, and this was the real killer.
Nothing had sold within a year and a mile of this house. My total real estate education at that point consisted of having binged watched a lot of flipping shows. I did what all those people did. The house sold in less than eight weeks for a little under asking. It gave me a ridiculous sense of confidence of like, “That was so easy. Let’s do some more.” Then I took some actual training, flipped remotely in Tennessee in Chattanooga. I became a partner in a large multifamily. I’m in 140 units in Fort Worth, Texas. That was a disaster because the management team embezzled money and we were very lucky that we got everybody’s principal out. Nobody made anything, but at least nobody lost any money. I was buying student housing at Temple University in Philadelphia. It’s the big public university in Philadelphia for some investors in California, and I managed the units. That’s what got me into notes because a lot of you who buy to hold know that when a landlord is going to put an investment property up for sale, they lease it up so that they can sell it to you cashflowing and everything’s great. In the first two months after buying a triplex in this area, there was one apartment, one out of three in this building that was home invaded twice in two runs. Even though the college is in a bad neighborhood, still that doesn’t happen randomly.
Once the people moved out and we got in there, we found their drug paraphernalia and all those things. They were drug dealers. There was gunfire in the second home invasion. I was tasked to cut the bullet out of the wall. I was literally on my knees with a bread knife, cutting out a piece of drywall with a bullet in it. I just thought, “What in the world am I doing? I am a sucker mom from the suburbs. I should not be cutting bullets out of walls.” The formula, as I understood it at that time was, bullets plus drug dealing tenants equal no more for me. That’s when I started to get serious about notes. I started looking online and that always brings you to Scott very quickly. Even though Scott didn’t do as much back then, compared to what he does now, he was still pretty much dominating the topic online. I quickly found him. I did a year of self-study just watching Scott. I can even remember going to visit my daughter in college. She had classes one afternoon and spending four hours watching Scott breakdown a tape. I thought that guy just doesn’t stop, basically. I came up with an audacious plan. My plan was what that guy does, I’ll do the same thing.
Towards the end of 2016, I decided to take the leap. I took Fast Track the weekend before Thanksgiving and then about two weeks later, it was my first Mastermind in Orlando, and bought my first two notes through Scott at the end of that year. When Scott asked me to give this talk, I asked myself, “What can I give you that’s valuable? What is my secret sauce?” I thought what I hope to do is tell you exactly what I did to get here and what I learned along the way. These are things you should know to understand and be able to compare your situation to mine. I had money, I didn’t have to raise money right away. I already had a self-directed IRA inherited from my dad, set up as a checkbook IRA. I had been a private lender before so I was already used to moving money in and out of there. I had one investor. He had invested a total of $60,000 in one of my flips. He was the one who asked how you can make money investing in notes that no one’s paying on. Every note I bought so far except a few came from source that Scott gives in Fast Track. Those of you who are wondering what is the value of Fast Track and Mastermind, not only is that one of the huge pieces, but being in Mastermind also gives you a safety net and a ton of mentors. I cannot tell you how many cliffs I almost went off only to have someone call me back at the last minute because I was able to make a phone call and get an answer right away.
I’m very detail oriented. I think that helps. Most of the time people hate that. I have finally found a world where it makes sense and it’s a good thing. My portfolio, I currently have 33 notes and CFDs. I’ve sold some and gain some more. I slow the pace down in December after your fast growth. I have a good memory and for a long time you can keep it in your memory. Some people do spreadsheets to keep track of what’s going on with their notes. At a certain point, nobody can keep it in their head anymore. That was me. I also had a big problem with trying to make QuickBooks working in a way that I could generate quick, accurate reports to JVs about how much of their money was still in my account. I was an investor in a note fund before I bought my first notes. As an investor, I appreciate how important it is to have good communication from the person who has your money. Because I invested with someone who literally a year went by, a bunch of us gave him money, we thought we were going to be part of the conversation about what notes he bought. He was buying only seconds and we were all very hungry to learn the seconds business. He didn’t show us anything. He didn’t show us his thinking process. It was very passive. It wasn’t for me at all, the fact that I never knew what was going on. It gave me a lot of sleepless nights. I’m very careful to keep in touch. I call my JVs when there are things happening. I email them when there isn’t even anything happening.
Portfolio-wide, my average cash-on-cash return is 24% which equates to $20 a month income for every thousand dollars invested. My original dream was $10,000 a month. At this point, if everything was paying in my portfolio, which it will be eventually, I’m at $8,500. I mentioned this not to be like, “Yay me,” but to tell you, “Get ready.” It’s very achievable and it doesn’t take a long time necessarily either. It’s good thing you’re here, you’re learning a lot of valuable things. You’ll have a lot of trouble organizing what you’ve learned over the next few months to get the most out of it. I’m here to be a beacon of hope that whatever your dream is, remember you can get to $10,000, you can get to $100,000, you can do it. I started to think, “If they impart to you all the wisdom that I’ve gained in 30 deals, how would I do it? How can I organize it? It’s like so many random things.” Then I thought, “I’m literarily inclined,” so I took my cue from Charles Dickens. I decided to give a tale of ten houses. I’m going to tell you about ten deals that I did and what I learned in each one.
My first Mastermind, Scott asked those of us who are new to the Mastermind to do a short presentation and to include in it a deal that either we were actively working on or we hope to buy. I was talking about this house in Michigan, which I didn’t own yet, but was one of the ones I bought at the end of that month. I’m going on and on and giving all the numbers, everybody is with me. Then there’s a lull and in the back of the room someone yells, “Where in Michigan?” “Flint, Michigan,” and there was a groan, like a tsunami hit me. “Flint, Michigan. You have to be kidding me.” That brought to mind the fact that I want to say a couple of things upfront. A lot of people live in Flint. There are a lot of communities that you wouldn’t want to live in that have lots of people living in them. Even if Godzilla trampled Flint, a lot of them would want to stay. They already have poisoned water, what else can we do to them? They’re still there. They’re not leaving.
Almost half of Americans stay exactly in the town where they were born and 75% don’t move more than 50 miles away. You can be pretty confident that unless a town is radioactive or aliens have landed there, that the people there, if it’s a good sized town you can buy a house or you could probably find someone else to sell it to. I have JVs all the time who come to me, they like to be prepared before they talk to the person they’re going to JV with. “I’ve done the research. I have identified ten cities in America that are growing quickly. They have these metrics. The schools have this level of college attendance.” You can’t go by what you would buy or where you would go. The people that we talk to, our borrowers particularly for low value houses are, it’s sad to say, used to having bad schools. They don’t all aspire to moving somewhere where there are better schools. They have other things that are important to them living near their family, staying where they grew up.
The important thing is don’t look with your eyes. You’ll know better once you have borrowers, what matters to them. What happened with my house in Flint? The borrower was about a year behind when I bought the house. Her husband had been injured at work. They had won a workers’ compensation judgment and they’re waiting to collect. Everyone was very excited because their plan was either pay off the house or at least pay it down. They were excited, I was excited. Everything was great. We were getting the paperwork together and figuring out, “What exactly do you want to do? How much you will pay?” Then suddenly, she went dark and we just had no idea. She doesn’t have any money.
Now what’s going to happen? We found out that on March 8th the house burned and she was suddenly wandering from pillar to post with her family, unreachable. It was really a bad situation. This was a contract for deed, which for people who are new, who might not understand the difference between that and a mortgage is in a contract for deed, it’s like a car loan. The people have to make all the payments before the title transfers to them. With a contract for deed, you, the lender own the house and the people who are in it have a contract that outlines the terms, what they pay, for how many years. With contract for deed people, I find they almost never have insurance.
If I don’t have proof of insurance from the note seller when I’m buying a note, I automatically put insurance on, and I did put insurance on this house. I had $25,000 of insurance, which was the maximum I could get at that point as a new investor without a portfolio that would get me a better rate and better coverage. I had force-placed insurance on this. The real shock there was that the borrower also had insurance, a lot of insurance. When a realtor looked at this house before I bought the CFD, he told me that the value was $55,000. This borrower had $113,000 in insurance on the property and they ultimately paid her $110,000. I got paid but this is what I learned in this experience about insurance and fire.
When this first happened, I spoke to everyone who had mentored me from the Mastermind at that point and nobody had had fire because I should’ve talked to Adam Adams. I think he’d had several by then. It’s a situation that people don’t know. It doesn’t happen more often, fires. If you have more than one policy, and we did. I had mine, she had hers. It’s not like life insurance. They don’t all pay. The idea of insurance is that you are to be made whole but you’re not supposed to be enriched. They’re trying not to incentivize people to destroy their houses by setting them on fire. I did not file a claim immediately because it was very clear that I was going to collect on her policy, because the previous owner of the CFD was already a mortgagee on her policy. All I had to do was show them the paperwork that I’m the new owner and they slipped me in as the new mortgagee.
I should have a filed a claim. My hesitation was when you go to get any new insurance, they always ask you, “Have you had claims?” I thought like, “I don’t want to be blacklisted in the future because I’ve had a claim. Let me just collect her insurance.” That was dumb because if you don’t file a claim within three months with my company, you can’t get paid. If anything had happened with her policy, I would’ve been to blame. Make sure your policy covers malicious mischief. I don’t know why the insurance company didn’t think it was intriguing that she wasn’t paying her mortgage or her taxes, but she was paying her insurance. I would have been a little curious about that. If you’re insuring against malicious mischief then, you, as the lender will still get paid, even if it is the borrower who destroyed their own home. That’s important. Here are how the numbers looked. I paid $15,000 for the CFD. I had $500 in expenses. The insurance payout was $42,000, so I got a $26,500 profit in. I owned the thing for eight weeks to nine weeks. It took longer to get the money, but that’s 171% ROI. I’m very sensitive to people’s problems, I asked myself, “Am I allowed to be happy that I made all this money because these people lost their house?” It turned out that the answer was yes because she had so much insurance. I got $42,000, she got $68,000.
She went from being a distressed homeowner to going out and buying a much nicer house with cash and she’ll never have another mortgage payment in her life. Plus, she had additional insurance on the contents of her house. I don’t want to trivialize how sad and hard it is to lose your stuff, but they were happy after the initial shock wore off. It was a good time by all. Here’s another Michigan house, Bay City, much prettier place. I did this deal with a good friend from the Mastermind, Alyssa Getzoff. A lot of, you might know her from a social media or meeting her at conferences. I did a presentation on this house at the Distressed Mortgage Expo in Newark. Their concept was they wanted each of us to present Deal or No Deal, they asked the audience whether something was a deal or not. I need to define what makes something a deal to me. I want reperformers. I look for at least 24% cash-on-cash return, and I want it to be saleable if I take it back. By saleable, I don’t mean it’s beautiful and perfect condition. I just mean it’s not in a neighborhood with the bullets are flying. It’s the right setup, enough bedrooms that a decent family would want to live there.
The PI payment is $362,000. We paid $15,000. I don’t remember what the cash-on-cash return was. They’re a little over a year behind. It was occupied and we had a realtor who lived in that neighborhood that was very high on the neighborhood. He was all, “Buy it.” This was a very typical contract for deed deal. We thought, “Occupied, they’re pretty far behind, but it’s a nice house, good neighborhood. They’ll probably stay.” This was a mother and her adult daughter who owned this house. We did the typical board the notes, do the borrower outreach and we used Polaris, which I’m sure you’ve heard about them. Steve Gomez, who was the only Polaris person at that time, was the one who called them.
Steve is so sweet and so friendly and kind. He calls people up. It’s never like, “Pay your rent.” He is like, “What’s happening? Are you okay? What can you pay?” He’s a darling. We call him the Mr. Rogers of Loss Mitigation. He called up what we thought very nice ladies. They listened to him for a few minutes and they hung up on him. I just thought, “This is not a good sign.” From that point on, they never answered the phone again after he called. We reluctantly went to legal. We did a forfeiture, which is only $500 in Michigan and it doesn’t take very long. At the end of June, we had a judgment and the house was ours again. In Michigan, there’s a 90-day redemption period though. We didn’t want to wait. That had already taken long enough and we were eager to get the house back on the market.
We found them, we offered them some money to waive the redemption period, which they did for only $200. We send a mobile notary over there with a waiver of redemption document that I wrote myself. They signed it and we were ready to go, “Let’s look at our house.” That’s what it looked like. This is pretty standard for a contract for deed. People have walked in and they have gorgeous house, but for the most part this is what they look like. The ceiling is solid gold, nice paneling. It’s timber country up there. There are tons of bookshelves. They were educated and interesting people. There’s a weird mural. I’m glad it wasn’t like 666 and Pentagram.
They did some repairs on the plumbing. They like the open concept on the walls. It’s nice. There was a hot tub in the backyard. I don’t know what happened here. It’s like somebody punched through the wall from the back. The kitchen didn’t even have a sink and had like a ceramic sink that I don’t even know where it was. It was like they took it with them. I’m like, “Why would you do that?” The basement was full to overflowing. It took a huge dumpster just to get everything, all the loose stuff out of this place. What we did was we didn’t renovate, we didn’t fix it up to be like a flip. We cleaned it up and made it functional so that we could resell it on another contract for deed.
We let the contractor pick the new sink cabinet. We fixed and primed the walls. I know people who very collaboratively do tinted primer. They’ll get regular primer like tinted, custom color at Home Depot and then you can prime and paint the walls with one coat. We didn’t do that. We said, “At least, let’s get it so they can paint it their own colors.” This was not too bad. We changed the toilet because when the toilet has staff for a long period of time with no water and it’s beyond gross. It needed cleaning. There were no shower heads so we put that in. We made it clean. We had the choice to redo the floors. We probably would’ve sold it faster and probably for more if we had, but we were sick of it by then. We didn’t control the contractor. We should not have spent $29,000 on this house. We didn’t control the contractor enough. That was the problem. We did a lot of back taxes. MLO is a Mortgage Loan Originator when you’re selling a house to an owner-occupant, it behooves you to use an MLO to comply with Dodd-Frank rules. If you’re going to resell, once this is a performer, if you want to sell the note or contract for deed down the line, it gives a buyer that confidence that you’ve done things properly.
We sold the house to a land contract buyer for $50,000. He’s a tattoo artist so I figured he’s artistic. He’ll fix the place up like peanut and purple. He’s going to live there with his two teenage sons and his dad, which is cool. They put $3,500 down, reducing our money in the deal to $26,000. PI payment is $421,so cash-on-cash return is 19.4%. That does not make me happy. I don’t like anything below 24. I certainly don’t like anything below 20, but let’s see what happens a year down the road. If we were to sell it to give a yield of 12%, we would get under $40,000 for this and at that point, our ROI in the deal would be 64% in a year, more than a year because it took us a while to fix the place up. As I want to just show anyone who’s new or doesn’t do this yet, TVM calculator is an app you can put on your phone. The way you sell notes, once they’re performing, you get them performing and then you want to sell them, is that usually you sell to give a particular yield. 12% is the level at which people get very excited. I know that people will take as little as 8%, but they jump at 12%.
This is a house in the suburbs of Atlanta. I bought this one and the house that burned through Scott at the Mastermind. This is the first conventional note I bought. It was a sub-performer, not a non-performer. This lady would skip payments, but she never stopped entirely, and that was very appealing to me. It has a high PI payment. We found out after we started talking to her that this lady who wasn’t paying her mortgage payment every month, actually had a car where the car payment and the car insurance payment equaled her mortgage payment. That led to a lot of funny conversations with other note investors about how she might prefer to just live in the car, but something had to go, the house or the car if she wasn’t going to be consistent. Towards the end of the year, this lady did start paying regularly. She’s been a great borrower.
At the end of the year in December, I went through, for the first time, the ritual of checking everyone’s taxes. This woman had not paid her 2017 taxes, and her taxes were very high for Georgia. Georgia taxes generally are pretty low. The Southeast in general was pretty low. With a homestead exemption, which she was totally eligible for and a disability exemption, she should have been paying much less than the $1,900 that she was. In December I called her and I was like, “You need to go in and make a payment on your taxes, and while you’re there apply for these exemptions. You’re going to get a big discount.” I had that conversation with her early December. I left it with her. A month later, I asked someone else to call and reminder her. She hadn’t gone yet. She’d been sick, holidays.
At the beginning of the first week in March, I was literally sitting at my desk and I had a psychic alarm go off in my head and I was like, “I bet the deadline for signing up for those exemptions is now.” I called the county and indeed, the deadline was that week and she hadn’t come in yet. I immediately called her up, I said, “You’ve got to get in there. You’re going to lose this.” She ran down there the next day. She didn’t have all the paperwork for her disability, but she went back the next day. Both of these days, “I’m going to call you at 2:00. You haven’t gone yet. They close at 4:30. You can still make it. I’m going to tell you to go.” I call her the day she was supposed to go with all her paperwork. She didn’t go yet at 2:00. “I want you to call me when you’re leaving. Just tell me what your taxes are now.” I didn’t hear from her. I finally call her like, “What happened?” She’s like, “They reduced my taxes from $1,900 to $600.” We care about that. I would do that anyway because I recognize that not everybody that we work with as borrowers, they don’t necessarily advocate for themselves. They don’t know to do things and I’m very happy to bully them into whatever I think is going to be helpful. She might get Hardest Hit Funds. Georgia reopened their Hardest Hit Funds after a long hiatus. Her PI payment is almost $700. Note purchase was $27,500, and cash-on-cash return is 30.4%.
This is what would happen if I was going to sell it to give a 12% yield. I would get 51%. With the cashflow that I would’ve gotten in a year, my profit will be 31.9% and the ROI is 116%, but I’m never going to sell this because I like this lady at this point. We have had hilarious conversations that she thinks I’m her best friend. She complained to me about how she needs to get her PI payment lower. She doesn’t realize that I’m the one who could lower it for her. I’m going to wait and see if she gets Hardest Hit Funds and then we’ll have that conversation about lowering it.
This house in Birmingham. I like Birmingham. It’s a fun city. This is also a contract for deed. I bought it in October, but the taxes had been sold. In Birmingham, your taxes are due on the 31st of December for that year. If you don’t pay them by May, they sell your taxes at a tax sale. That seems harsh, but you have three years to redeem. When I saw that the taxes had been sold in May of the same year I was buying and I thought, “I’ll just redeem it.” I bought it. This borrower, I get in touch with the Redemption Department at Jefferson County in Alabama and they helped me on how do I redeem it. Four years of taxes had been paid in May of 2017. It was about $3,000 altogether that was owed. I began the redemption process. The first thing you have to do is whoever bought the taxes, you send them this form indicating that you’re in the process of redeeming them. I sent it off and about a week later again, first thing on a Monday morning, I barely have my eyes opened, the phone rings.
I picked it up and this lunatic is on the phone, and he is screaming about this house, about how he owns this house already. He paid all these taxes and he already owns this house and he is waiting for the states to send them the deed and don’t even think about trying to get this house from him. He’s going to fight me to the death. He’s got a southern drawl so it doesn’t sound quite as menacing as it might coming from the New Yorker or somebody like that. I was like, “Who is this guy?” I’m thinking, “Maybe he’s right.” Then he softens a little. I’m listening and he offers to buy the house from me. He’s telling me he’s a big landlord in Birmingham. He owns the house on either side of this house and he’s like, “This is my house. Don’t you even think about trying to get this house.”
We talk prices. I was going to sell this to you. He already knows what I paid for because it’s on the quick claim deed that is recorded. He’s like, “I see you spent $13,650. I’ll give you $15,000.” I’m like, “I’ll get them up to like $18,500,” or whatever. We’re talking in general. I’m not planning to do anything. We hang up. Immediately, I’m dialing everybody I know, like an attorney. “This is what this guy just said, is he right? He could be right. Do you think it’s true?” They’re like, “We can research it for you. It would be $2,000.” I’m like, “Never mind.” I was trying to figure out, “What do I want to do, should I sell it?”
I got a phone call and it’s the borrower. She’s like, “This crazy man came to my house. He’s like waving around the deed. He said, ‘You own my house,’ but he owns my house. He threatens me. He told me he’s going to throw me out in 22 days,” which I don’t know how long it takes to evict a tenant in Birmingham. She was completely freaked out and she was like, “I don’t even understand how my taxes got sold because I’ve been paying my taxes every month with my house payment. Up until I stopped paying earlier this year I was paying my taxes.” I thought, “That sounds right, because when this CFD transferred to me, the service transfer, $2,500 of escrowed money came with it.”
I thought like, “What happened? Who did not pay this woman’s taxes?” Now I’m talking to the broker who sold me. I’m talking to the servicer. It wasn’t on their watch. I’m talking to all these servicers. Everyone’s pointing fingers at each other and nobody’s doing anything. The story that this woman told me, it seems clear to me that the servicer dropped the ball. Now she’s being harassed by this crazy person. In that moment, I decided to become this woman’s hero. I thought, “There’s no way this guy’s getting this house. If I have to go to court, I’ll do it. If I have to fly to Birmingham, I’ll do it.” This woman has been wronged.
I finally decided that the way to find out whether he owned it or I owned it without spending any extra money was to keep redeeming it. I let them know that the person who bought the taxes was uncooperative. Then they demand proof to show that you did mail the form to them and it had the stamps on the certified letter. They went ahead and redeemed it and they told me, “You’re in the clear.” This guy didn’t like that and I did get a few crazy wrap up phone calls from him. How I see him is like Jack Nicholson in The Shining. He’s definitely got that kind of personality. Hopefully this woman will never see him again. I hope never to see him. Here is the truth that you must understand, you will never have a boring day at notes. It is one crazy situation after another. Personally, I love it. I have never enjoyed days where you do the same thing every day. She had a big PI payment $480. I reduced it to $440 so she could afford the escrow insurance and taxes too. My cash-on-cash return is 39%. That was the least I could do. I will never sell this note, but if I did, this is what the numbers would look like and the ROI would be 184%.
There’s another house in Flint. To open your minds a little bit, there are two paths to a performing note. One is to buy a non-performer and get it performing, that’s what we’re focused on here. The other way is to buy a house and sell it with owner-finance to create your own performing note. That’s what happened in this case. I went to Flint to boots on the ground my own and saw this house. I bought it right off the MLS and did some fairly minor fix up, clean up painting. I can say minor because I didn’t do it. We spent a total of $24,000, sold it for double that. The down payment reduced our money in the deal to $21,500. We’re getting a cash-on-cash return of 25%. We would have a little more trouble selling this one as a performer because there isn’t equity in this house. We sold at a very high price to make the numbers work for my investor. Normally, people want to see equity in a house when they’re buying a performer. I personally don’t care that much because you can resell it for this number because I sold it for this number. Even though it’s not worth $48,000, you can always get $48,000 for it.
Here we are back in Birmingham. This is a contract for deed that I got with a person that a lot of you know and love, Eric Hyde. I was going to let him explain what happens with this. We were selling this and we decided to do something novel and rather than put up a post like we would do a video sales pitch with the charismatic Eric Hyde. “Our video is on a performing contract for deed that my business partner and I, Gail Greenberg, are looking to sell. Here’s the story. We bought this thing in 2017 as a non-performing note. The idea was to rehab the borrower and get this thing to re-perform and sell it to a note investor looking to make a positive cashflow. We’ve ordered this thing at FCI and got the pay history and we realized this thing is in fact performing. What we decided to do was hold on it for a little while to ensure that the income stream continued month after month. Here we are today, and the numbers looked like this.”
We bought it for $8,500 and sold it. Between the bump we got and selling it on the cashflow, our total return was 95%. Annualized, that’s over 200%. We got a big price for it considering what we paid for it, but we offered it initially at a return of 13.5%, which would have been a sale price of over $18,000. By negotiating a good deal for himself, the person who bought it got himself a performing note that’s returning 14.46%. We’re all happy, another win-win.
This house is in Lansing, Michigan. This is not a long story. This is a very straight forward contract for deed. What makes it unusual? The collateral file for a contract for deed contains at minimum, a deed, a land contract, and then when you buy a house gets deeded to you and you get an assignment of land contract from the person who’s selling it to you. That gives you the right to collect on the land contract. This time, there was no land contract in the file and it was terrifying. I was like, “How in the world did this happen?” I had an attorney review this collateral file and he did not notice that there was no land contract. I called everybody I know who’s been in this business forever. I was like, “What do you do if there’s no land contract?”
They’re like, “What do you mean no land contract? There’s never no land contract.” I thought, “I’m blazing trails here.” After I had my moments or several I realized like, “This is not a problem. I own this house at this point. It’s more of a problem for the borrower. They need to prove to me that they’re not just tenants by showing me their land contract.” I got in touch with them and I was like, “Can I have a copy of your land contract? I need that for the file. I don’t know that you have the right to buy this house.” They were very happy to supply it and we all lived happily ever after.
House number eight came on an NPN tape, but it was an REO, meaning that the lender had already foreclosed and owned it. I don’t normally buy REOs. I don’t like vacant houses. I don’t like the surprises they hold like the broken pipes and all that jazz. The 666s spray painted in the basement, but this one intrigued me, Kokomo. Because it was an REO, I got the lockbox code. I found a property manager to go over there and walk through it and like, “How much would it take to get it fixed up?” He goes over there and walks through and it’s great. I had already negotiated the deal. It was listed as a duplex. I was like, “A duplex, what are you talking about? Are you talking about this unit? This is not a duplex.” Instead of selling it to me for $16,000, they sold it to me for $13,500. It was only after my property manager went over there to walk through it, he was like, “Do you know there’s a second house from this property?” I’m like, “No, do tell.”
I looked at the overhead shot like, “So, this is the house in the first picture. This is what I thought they were calling the second unit. This house is bigger than this house.” I ended up getting two houses for the price of one. We ended up renovating both of them. This is luxury vinyl tile that looks like wood, which I’m glad we did that because without my knowledge, my property manager rented this place to someone with a big dog. I can’t even imagine how scratched up the floors would be at this point. I bought it for $13,500. The renovation cost was $20,000. It rents for $1,100 a month out of which I net $700. The cash-on-cash return is 25%. This is the only rental that I own. I was going to sell it with owner-finance to an investor to turn it back into a note. For the time being, I’m content to keep it. I’m going to be a landlord for a little while. We’ll see how that goes. Riverdale, Georgia, this is pretty close to Atlanta; Clayton County, Georgia. This gentleman is supposed to be paying $646, but he can only afford $450. At a $21,000 purchase price, that’s a 26% return. I’m okay with that. The borrower has congestive heart failure, which I know. We never delve into people’s health history or anything like that. You can stalk them on Facebook, you can do other things to learn about them, but private records are off limits. He wrote and told us that he has congestive heart failure and he had applied for disability.
We immediately said, “Until you hear back from disability, we won’t chase you for anything beyond $450.” If it went up to $646, my cash-on-cash return would also go up to 37%. If he gets disability, he can also definitely get Hardest Hit Funds since Georgia has started offering them again and he has the perfect profile to get that. He has disability. It was recently diagnosed. You have to apply within three years of getting your disability determination. The problem for this gentleman though is that he’s been turned down for disability which he told me when I was saying, “Let’s apply for Hardest Hit Funds.”
This is what I mean about how borrowers don’t think the way we do. His reaction to being turned down for disability was like, “I guess I don’t get it.” Me, being a feisty northeast a girl I was like, “Let’s look into this.” I Googled it and it turns out that 70% of people who apply for disability don’t get it. This guy has got congestive heart failure, tell me why he doesn’t deserve it. They routinely turned down most people who apply for it. They want to see how determined you are. I’m extremely determined. It turns out that if you then, after you’re turned down, hire a lawyer on contingency at no cost to you to fight it and do an appeal, two thirds of the people who appeal then get it and they start getting it right away.
I said to this guy like, “I’m not going to tell you what attorney to use,” but I gave him a bunch. I said, “Don’t pick anyone who wants any money from you upfront. They should give you a free conference to go over your case and see if you have an appeal. If they take it, fingers crossed, you got a good chance of getting it.” When I last saw him, he was off to see the attorney. We’ll see what happens. I don’t know how I look to these people. They must think I’m a lunatic because I’m like, “You get in there, you tell them.” It’s like with my kids, I like teaching them life skills that will hopefully help them out.
This is the final house. This despite it’s sad condition and you can see how sad it is. This is my favorite house. I think I’ve said three times already, I want a house in New Orleans. This is in New Orleans. This borrower doesn’t realize she’s the only one I’m not rooting for to re-perform. She was eighteen months behind when I bought this contract for deed and I thought, “There’s no way she’s going to reinstate. I was like, “Maybe this is my house in New Orleans.” Then completely out of the blue, she takes money out for retirement fund and pay $6,900 to reinstate this place. I thought, “I guess that’s not going to be my house in New Orleans.” Because she had been so casual about not paying in the past, we wanted to have her sign a document that stated the fact that even though she had been allowed to be late in the past, that that was not going to be the case going forward. She understood that if she was late in the future that we would be evicting her. We sent her this letter, didn’t hear back.
Then luckily, my friend and yours in New Orleans, Jonathan Burden, he offers to hand carry this letter over there and get her to sign it. He calls me up and he’s like, “Gail, you would not believe the condition of this house. It is falling down.” He even saw it on the Google Street View. This is a side by side duplex. There’s electrical wire going from one side to the other side, outside in the very moist New Orleans weather. This thing is a tinderbox and this is a young woman. I don’t know if there are young children living there. I don’t know if they have smoke alarms. This freaks me out. You can see how close the house next door is to it. This is scary to me. We tried to do a safety inspection. That paper on her door is our notice letting her know that with or without her permission, we have the right to inspect and that we intended to come in and inspect. We would rather do it with her permission and particularly she has a dog. We didn’t want anything to happen with the dog. After much chasing, cajoling, minor threatening, she made a date with us to let the inspector in to do a complete safety inspection of both sides.
Jonathan arrives there with the contractor. The woman is nowhere to be found, but her boyfriend is there in a belligerent state of mind. He runs Jonathan off, John videotaped the whole thing. I have this very scary video of this guy. He didn’t threaten him in any way, but it was obviously not a good situation. At this point, I am not sending anyone over to inspect. I don’t want anyone to get hurt including the boyfriend. We’re about to find out if I can evict for reasons other than financial. This isn’t a Harbour contract for deed, but it’s very similar. They all have requirements in them other than that you pay. The requirement is usually that you maintain the house in good condition, and that you buy insurance on it. This borrower is out of compliance on both of those counts.
We’re still exploring the situation because Louisiana is the only state that has a different legal system. They have the Napoleonic code because they were owned by the French. They have their own version of a contract for deed called a bond for deed and the generic written ones contract for deed document written by the people who sell these contracts for deeds for us, they write one contract and they use it everywhere no matter how specific the language requirements are for the states. Watch out for that if you’re buying a contract for deed in North Carolina because they have very specific language.
We’re going to find out whether I can evict them for that. It’s still a cliffhanger, the story goes on. I’m sure many of you are asking yourselves like, “These are all successful or pretty successful deals, where are the bad deals and the money losers?” I’m not going to disappoint you. I am losing money on a deal for the first time in my real estate career. The only reason I didn’t make it one of my houses is it’s not completed yet. As a perfectionist who thought I could avoid all losses and bad luck, this has been a very tough situation for me. I have gone through a lot of long, dark nights of the soul about this. I can say that now that I’ve had a few weeks to get used to the idea. We’ve had many speakers on this Note CAMP talking about fear and how it stops people. I think you should hurry up and do something.
You should have something happen to you that you’re afraid of as soon as possible because you will realize you can get through it and then you won’t be as afraid about the next thing, which is the best thing that can happen. I have three evictions underway, not including New Orleans. I also have a full foreclosure or rental property. That makes me sad. I don’t like to throw people out. We do our darnedest to keep people in their houses. It’s the most lucrative outcome for us, even if we weren’t nice caring people. I’m not happy about that. I have little issues. I have another borrower who owes $400 a month. She is having her disability appeal in July. She can only pay $100 up until then. Madison was very gracious in agreeing that instead of paying $95 a month until July on this note, I can just pay $40, so we’ll clear $55 or $60. I’m super excited about that.
You have constant nagging problems for borrowers who don’t pay most things, but their sewer bill. I don’t worry about things where they’re going to get their water turned off. I’m sure when that happens, they’ll start paying. You have to pay attention to taxes not being paid because you can lose your property. These are my final thoughts. Don’t worry about risk. You can mitigate it. You can eliminate it, just get used to it. It’s practice that helps you get good at identifying risks. I can’t wait to tell you the story about the house of mine that I’m losing money on because I did a lot to mitigate risk and it happened anyway. Put away all your concerns that you can ever be careful enough that something will happen. Jump in. You’ll make mistakes, they’re all necessary. That’s how you get good at this. This is my favorite quotation.
Obstacles are not blocking the road. They are the road. Learn how to go over that little baby. Bring your rappelling equipment and you’ll be fine. Don’t wait to feel ready. No rational person is ever fully ready to take on this. Your ego does everything it can on a subconscious level to keep you safe and it will be screaming that you shouldn’t do anything remotely like being a note investor. Your ego wants to keep you wrapped up in a blanket with some cocoa and a marshmallow. If you’re prepared to act, we’d keep finding perfectly good reasons not to. There’s something you need to understand and I would say you need to go back to Rhonda Britten’s presentation because that’s usually fear that’s pretending to be making good sense.
Martin talked about having a calling to write a book. I have a calling to help people who feel stuck. I’ve been ignoring the siren song of this because I’ve been concentrating on my note business, but I’m definitely going to do it at some point. If you are stuck and want to get unstuck, once I started doing something, I’ll send you a notification.
We have a question, “The insurance that you placed was force-placed insurance, right?”
We have another question, “Back to the firehouse, did you have any proof of how it started?”
I know we love to get involved in all the details, but I’m not a fire investigator, although I play one on TV. I couldn’t even get the fire report. I was curious myself what they came to. It seemed to me that the insurance company, they were incurious. I was surprised. How did they come up with this $110,000 value on this house? They put all the information on the house, square footage, number of bedrooms into a big giant national database that spits out a value. This borrower got twice what I was told the house was worth and she challenged it. She had $113,000 worth and she wanted that extra $3,000. I thought like, “I held things up for a long time and in the end, she still got the same $110,000 they offered here right from the get-go.” It was a very interesting situation.
We have a question, “Are you doing it now full time or part time?”
I am in this full time.
We have a question, “How often do you check that they’re paying taxes once the loan is re-performing?”
We try to get them escrowing taxes as part of the re-performing, as part of the forbearance leading to the re-performance. That’s a key thing when you have a lot of notes, you don’t want to have to be checking people all the time. You don’t need to check more than at the end of the year. Generally speaking, everyone’s taxes are due at the end of the year. They might pay in two installments, but nothing bad happens until they don’t pay for the whole year.
We have a question, “Gail did a lot of her own borrower outreach. Were there any outreach compliance issues or risks that you were concerned about?” Another question that was tagged in, “Why wouldn’t you have all your servicer do all of that?”
First just to correct your impression, I don’t do my own borrower outreach. I have mentioned talking to my borrowers. I only talked to the one who called me from Birmingham because the crazy man came to visit her. I will call them about things like, “Go get your homestead exemption.” I will talk to them about things that don’t have to do with collection. As far as who calls them about collections, I always have loss mitigation. I use Polaris for all the notes that I boarded at FCI because they’re not famous for being good at loss mitigation. I do now have some notes boarded at Madison and I’ve let them do loss mitigation for me. The only one they’ve done so far is they called the guy and he was like, “I know I owe you a lot of money. I’m going to start paying you now.” He owed a total of $5,000 for reinstatement. He sent in $3,400 the first month because someone called him to say like, “Do you realize you owe a bunch of money?” He’s like, “Yeah. I got a second job, I’m going to pay you.” I can’t say how great Madison is, but Damian Hernandez, who is their person, seems good.
We have another question, “Do you do a trial payment plan before you do a re-perform?”
Yeah. It makes sense to protect your rights, to put them on a forbearance plan. If somebody truly reinstates meaning they pay their entire balance, then there’s no trial because they are back in business. You don’t get to do anything legal at that point. They have fulfilled, they’ve met their commitment. If someone wants to pay you a little and then start making payments again and then have the rest of their arrears foot into their balance instead of being in this perpetual state of being behind, then you have a forbearance plan which just says, “We won’t do anything legal. We’ll give you a chance. If you make the payments under this plan, we won’t evict you. In fact, in a year we will put your arrears into your unpaid balance.” Usually, you demand somebody upfront to do that too, as Scott says. Skin in the game, that’s important.
Do you have any insurance companies that you recommend?
I’ve heard very good things about Seattle Specialty. The problem is when you’re new and you don’t have very many notes, you don’t have a lot of choices. By the time you have six or eight notes, many doors will swing open. I use some JB Lloyd. I almost switched because I was getting better prices from Ross Diversified. That’s someone you can use right from the get-go, it will take you with a couple of notes. If you board notes at FCI, you can sign up that you automatically have insurance from Ross Diversified. You have to get in touch with them first to set that up. The other thing is you can renegotiate your rates. When I got better rates from other people than I was getting from JB Lloyd, I was like, “I don’t want to leave you but you got to match these prices,” and they did.
We have a question, “When you discuss your stories like this online or on webinars, things like that, do any of your borrowers ever see those discussions and does it affect negotiations or the outcome in any way?”
Interestingly like the borrower I was talking about, I talked to her about going down for a homestead exemption, she talks to me. She knows my name, she has my cell phone number. She doesn’t know that I’m her lender. We are not friends on Facebook. Generally speaking, I don’t think my world overlaps too much with my borrowers. I suppose I could be proved wrong. This is the first time I’ve revealed a lot about my deals too, so hopefully Scott won’t put it everywhere like on a bus in Birmingham.
We have another question, “Is it possible to do an inspection that have a law officer there to accompany them to keep the peace? I’ve had to use that here in San Antonio before and it’s very helpful.”
I’m curious about that because I talked about that with an attorney. You’re talking about the New Orleans House. New Orleans is a pretty busy place. I don’t know that the police would entertain a request like that. If I went to court and got a judgment that they had to let me in, they would but I have mixed feelings about even asking in a way. You can tell by looking at the house. I probably have what I need if I can evict on that basis or they don’t need all the pictures except the ones I have.
We have another question, “What is the biggest mistake that you made that cause to lose your note?” Second one is, “On a percentage basis, what percent of the money in your 30 deals is yours versus others, like JV funds?”
I did the classic 50/50 split with my JVs. Sometimes, if we have something that re-performs quickly, I tip it more in their direction. I want my JVs to like me, so I’m very nice to them and I have very nice JVs, some of them are watching. I can’t reveal my secrets yet. I don’t want to jinx it because what’s going on there. Suffice it to say, I bought, it was a vacant house. With these vacant houses, I hate them. It looked like a very cute house. We found the borrower immediately, cash for keys and it’s so easy, but the house itself has issues. It’s under contract right now to be sold.
I can’t sell it for what I have in it, but I will give you all the gory details when I can. I’ll tell you something that Scott says at Fast Track when he reveals not just where he goes with the actual email addresses of people he contacts and tells you to tell them like you’re one of his people. The doors swing open, but he basically says then you could pretty much have a note business just from these sources. That’s pretty true. I haven’t branched. I’ve gotten the occasional one from other sources, but it’s all been from his people so far.
We have another question, “From the property with two houses, did you rent out both or were you talking about a different place?”
Yeah. They’re both rented, one for $500 and one for $600 a month.
We have a question, “My biggest fear is when it’s coming from right now, is it my first deal is going to be a bad deal and I won’t have cash to make the investor whole in their investment.” That’s big of you to put that in print because that’s everybody’s big fear. “Obviously the answer is more deals, but is there anything one can do to ensure their first couple deals are winners?” Not all of your deals are going to be home runs.
It’s going to happen. Hopefully, fortune will favor you and it won’t be on your very first deal. The best thing you can do if you’re not an experienced note investor is to JV with an experienced note investor, then you’ll have the training wheels on.
We have a question, “Are you working with a property manager remotely on that other one?”
My rental in Kokomo, yes. It’s too expensive and I shouldn’t say this because he might see this online but I would love to self-manage. I know there are people who do it successfully so I’m thinking, I should figure that out.
We have another question, “How many properties did you look at to buy the 30?”
On a contract for deed tape, it’s not unusual to have 400 on there. I had one tape in October, that’s the one in New Orleans house is from, also the one that the Eric Hyde was never a non-performing note was on. That was an unbelievable tape. We bought twelve off of that tape. Normally, I’m very picky. If I find two or three in 400, it’s a lot.
You’ve got Gail’s email, reach out to her. I’m sure she won’t mind. Reach out to her if you’ve got any questions because those are good questions. We all love our case studies and deals. Those right there are great way when you’re starting in this and you haven’t been doing it very long to learn what other people are going through to get where they’re at. It answers those questions of how many did you look at? How long did it take? How many failed? How many succeeded? What were those successes? What were those things you wouldn’t do again? Maybe they’re not even failures. It’s just things you wouldn’t do again, and things you would repeat, like rinse, lather, repeat over and over. Gail, thank you.
Thank you. Happy investing.
- Gail Greenberg
- Gail Anthony Greenberg’s Facebook
- Win Win Notes
- Fast Track
- Alyssa Getzoff
- Eric Hyde
- Jonathan Burden
- Rhonda Britten’s presentation on Note CAMP 5.0
- Damian Hernandez
- Seattle Specialty
- JB Lloyd
- Ross Diversified
- Scott Carson Facebook
- Scott Carson Twitter
- Scott Carson LinkedIn
- We Close Notes YouTube
- We Close Notes Vimeo
- Scott Carson Instagram
- We Close Notes Pinterest
About Gail Greenberg
Gail Greenberg is the Acquisitions Manager of Win Win Notes.
She has a broad real estate experience having flipped houses, invested in large multi-family properties and bought and managed student housing properties at Philadelphia’s Temple University for out-of-state investors.
Before becoming a fulltime real estate investor, she worked as a journalist and marketing professional.